Friday, 27 September 2013

Financial Requirements for Small Scale Business

The entrepreneurs should have right amount of capital at the right time to meet his financial requirement.
Short term or Working Capital Requirement:
  • Usually one year financial needs
  • Current Assets: Cash, stock, credit, sales, semi-finished goods.
  • Raw material.
  • Operational losses.
  • Advances to suppliers.
  • Commission to selling agents
  • Interest on loans.
  • Expenditure on wages, salaries, rent, advertising etc.
  • Expenditure on consumables.
  • Day to day administrative expenses.
Long term capital requirement:
  1. Fixed assets:
    • Land and building
    • Furniture
    • Motor-Vehicles
    • Plant and Machinery etc.
  2. Cost of setting up enterprise
  3. Intangible assets like goodwill, patents etc.
  4. Margin money required for raising working capital requirement.
  5. Manufacturing Unit: More Fixed Assets
  6. Trading Units: Less Fixed assets, more current assets & Working capital

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